Our title today emanates from that Kenny Roger’s classic, “The Gambler”…”You got to know when to hold ‘em, know when to fold ‘em. Know when to walk away, know when to run.” It seems this is a lesson that has been lost on PIMCO founder, Bill Gross and his minions. Because Mr. Gross knew how to “hold ‘em” in the last 30 years of a great bull bond market and because he built PIMCO into a two trillion dollar bond manager he has achieved great fame and credibility. He is now both legend and pundit, a media favorite; and this is a problem. It is a problem, because Mr. Gross does not seem to know how to “fold ‘em”, but the media continues to hang on his every pronouncement. And those pronouncements continue to get more frequent and eccentric.
To give an example, earlier in the month Mr. Gross and the PIMCO crew were all over the tube and print media, charging that the Fed zero interest rate policy (ZIRP) was slowing the economic recovery and that Ben Bernanke and QE were the problem. In other words, end QE. I made note of this in both Sessions 38 (Bad News Bearer) and 40 (Be Afraid, Very Afraid), and I took some issue with what looked like faulty reasoning in his argument. Today, three weeks later, as hints of a QE taper sprang from last Wednesday’s FOMC meeting tanked the bond market, Mr. Gross is out saying, something to the effect, let’s not be too hasty implementing this retreat from QE. This is a complete 180 on quantitative easing in three weeks.
All of this media exposure in a way looks like a veiled attempt to keep assets in place at PIMCO by keeping shareholders leery, in a cautious stance. In my opinion it is tarnishing a good name. It also brings the PIMCO organization closer media scrutiny. Chances are that this morning’s article on the performance, or lack thereof, of Mr. Gross’ pet project, the $285 billion PIMCO Total Return Fund, might not have been front page news, if he had kept a lower profile.
So Bill Gross, your hand at the market table looks very weak on a longer-term basis. We may be heading for tough times in fixed-income land. It may be time to “fold ’em” and get out of the lime light before you turn yourself into a one-shot (albeit a very successful) wonder.
What do you think?
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What do you think?
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